Fox Entertainment (NYSE:FOX) is putting together a sly strategy for the summer: Instead of letting its network take a vacation, the company wants to keep providing fresh programming. Usually, the summer months are devoid of many new offerings, but there's been a movement afoot in the last several years to abandon that old paradigm and shift to a new one. The basic concept is that the relationship a network has with its viewers should never go on hiatus; instead, a network should engage its audience every single month of the year to keep it from getting bored and skipping to another series on a competing network.
In a general sense, it's a bad time to be a major broadcasting network. The maturation of the cable/satellite industry has led to a universe of so many channels that fragmentation of audiences has forced the corporate TV suits to become ever more creative and to think outside of that proverbial box. Disney's (NYSE:DIS) ABC, Viacom's (NYSE:VIA) CBS, and General Electric's (NYSE:GE) NBC must change their core genetic material to produce different approaches that will allow them to change and survive with the competitive times.
All of these conglomerates have interests in cable channels, so they do participate in the growth of that important sector. But those interests alone don't address the dragging effects of high programming costs and the aforementioned dwindling viewer base in a perfect manner. There's no question that performance issues at a network can place a significant drag on a company's earnings.
Producing a calendar year of programming sans repeated showings is an interesting solution. Not only does it replicate the more nimble attributes of the networks' cable colleagues, it also offers an added side benefit. Since the major networks retain an ownership stake of many shows in their inventory, off-net syndication deals and DVD distribution would be more valuable in theory if an episode of a show sees minimal exposure.
There's another, better option that networks have been exploring as well to keep fresh: programming a run of a finite series. For instance, ABC is airing Stephen King's Kingdom Hospital, which is designed to end this season. Of course, if the ratings warrant it, ABC could bring the show back. But the idea of a finite story arc ensures an almost guerrilla approach to the business: Get in, then get out before the audience becomes tired of the plot. This is accomplished, to a large degree, via the exploitation of the reality series genre, such as Survivor. Unfortunately, one has to wonder when that fad is going to fade out, and when the expenses for a phenomenon such as The Apprentice will present a similar escalation-of-cost conundrum for multiple seasons.
The ideal, naturally, is to nurture a well-executed asset year after year and build a nice franchise; the problem is, as time goes on, the price for quality increases seemingly exponentially. That just isn't feasible for continued addition of economic value under current conditions. Ratings equal profits ultimately, so to keep eyeballs loyal to a broadcasting brand -- and, subsequently, the ad revenues growing -- a policy of no-repeats could help substantially, so long as the costs for the extra time can be adequately contained.
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Fool contributor Steven Mallas owns shares of Disney and General Electric.
